1. egabriel@edenconsult.net, www.olegabriel.com
ENTREPRENEURSHIP
OWNERSHIP STRUCTURES By
Elisante ole Gabriel

2. The concept of Entrepreneurship
What is it all about?
It is a process of seeking out all opportunities that are unique in the Macro-environment, organising the resources needed to exploit them.
Recall the SLEEP-TIN model for Macro-environment.
Any business needs to be owned by some one (person or non-person)
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3. General issues Human element in business Vs other resources
The art of copying with complexities
Make a human resource competitive
Manage for changes not changes
Believe in what you live (success)
How can ownership affect success or failure of the business?
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4. OWNERSHIP STRUCTURES LEARNING OBJECTIVES
To describe the different forms of ownership structures open to an enterprise
Outline the main features of each form of ownership including pros & cons
Delineate the ownership pattern(s) which is common in SMEs in Tanzania
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5. TYPES OF OWNERSHIP Proprietorship Partnership Company Co-operative
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6. PROPRIETORSHIP (Sole Trade Organisation)
DEFINITION: The Enterprise is owned and controlled by one person (an individual)
He/she the masters of the show, sows, reaps and harvest the output of his efforts
“ The one-man control is the best in the world if that man is big enough to manage everything” (William R.)
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7. MAIN FEATURES One man ownership No separate business Entity
No separation between ownership and management
Unlimited Liability
All profits or losses to the proprietor
Less formalities
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8. 1. PROPRIATORSHIP: Advantages
Simple
Owner’s freedom to make decisions
High Secrecy
Tax advantage (falls under income tax only, not corporate)
Easy dissolution
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9. PROPRIETORSHIP: Disadvantages
Limited Resources
Limited Ability (in terms of knowledge)
Unlimited Liability
Limited Life of the Enterprise (Once the proprietor dies, usually, not necessarily, the business go to the same grave)
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10. 2. PARTNERSHIP (Definition)
An association of two or more persons who have agreed to share the profits of a business which they run together. This business may be carried on by all or any one of them acting for all.
The persons are called partners, and in most cases their initials form the name of the firm.
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11. Main Features More Persons Profit and Loss Sharing
Contractual Relationship
Existence of Lawful Business
Utmost Good Faith and Honesty
Unlimited Liability
Restrictions on Transfer of share
Principal-Agent Relationship
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12. PARTNERSHIP Advantages
Easy Formation (less legal issues)
More Capital Available (more persons)
Combined Talent, Judgement and Skill (collective participation)
Diffusion of Risk (losses are shared)
Flexibility (quick reaction to changes)
Tax Advantage (lower tax rate)
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13. PARTNERSHIP Disadvantages
Unlimited Liability
Divided Authority (“too many cooks spoils the broth”)
Lack of Continuity
Risk of Implied Authority (decisions made by one partner bind all the partners)
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14. PARTNERSHIP Deed
“Partnership Dee” is the Signed, Stamped, and Registered written Agreement of the Partnership
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15. PARTNERSHIP Deed Content
Name of the firm
Nature of the business
Name of partners
Place of the business
Amount of capital to be contributed by each partner
Profit sharing ratio between the partners
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16. PARTNERSHIP Deed Content
Loans and advantages from the partners and the interest rate thereon
Drawings allowed and the interest rate thereon
Amount of salary and commission, if any, payable to the partners
Duties, powers and obligations of the partners
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17. PARTNERSHIP Deed Content
Maintenance of accounts and arrangement for their audit
Mode of valuation of goodwill in the event of admission, retirement and death of a partner
Settlement of accounts in case of dissolution of the firm
Arbitration in case of dispute
Arrangements in case of insolvency
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18. Registration of the Firm Procedures
Applying to the registrar of firms
Signing of the form by all partners
After registration, a Registration Certificate is issued
The register of the firm remains open for inspection on payment of prescribed fee for the purpose
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19. Dissolution of the Firm
Dissolution of partnership occurs when a partner ceases to be associated with the business.
Dissolution of firm is the winding up of the business
Dissolution of partnership, the business of the firm remains under new arrangement between the remaining partners.
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20. Dissolution of the Firm by Different ways
Dissolution by Agreement
Compulsory Dissolution (by adjudication, insolvency, or unlawful business)
Dissolution due to Contingencies (e.g expiry of partnership period, completion of the firm’s venture, death of partner, insolvency)
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21. Dissolution of the Firm by Different ways
Dissolution by Court (ie.unsound mind of a partner, non duty performance, misconduct, breach of the partnership agreement, transfer of interest, loss
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22. Settlement of Accounts
Payment of debts due to the third parties
Rateable payment of loans and advances
Payment of partners capital
Payment of surplus, if any, to the partners in their profit sharing ratio
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23. Settlement of Accounts
Losses have to be made up:
- First out of accumulated past profit
- Then out of capitals of partners
- Thereafter out of contributions from the private estates of the partners in their profit sharing ratio
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24. COMPANY
Def. “A Company is an artificial being invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly or an incidental to its very existence” (Chief Justice Marshal)
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25. Main Features Artificial Legal Person Separate Legal Entity
Common Seal
Perpetual Existence
Limited Liability
Transferability of Shares
Separation of Ownership from Management
Number of Members
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26. Private and Public Company
Private Company, by its Articles of association,
restricts the right to transfer shares,
Limits the number of its members to fifty
Prohibits any invitation to the public to subscribe for the shares or dibentures
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27. Public Company
Places no restrictions by its Articles of Association on the transfer of shares or on the maximum number of members, can invite the public to subscribe for its shares and debentures and public deposits.
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28. Privileges of Private Company
Only two members are required
Only two directors
No filing of prospectus
Immediate commencement of business
Neither Statutory meeting nor statutory report
Directors not required to give consent to act
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29. Privileges of Private Company
Profit and Loss A/C not inspected by a non-member
No limit on maxi managerial remuneration
No restriction on Managing Director appointment
No maintenance of an index of its membership
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30. Advantages Limited Liability Perpetual Existence
Professional Management
Expansion Potential
Transferability of shares
Diffusion of Risk
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31. Disadvantages Lack of secrecy Legal Restrictions
Management Mischief (misuses of company’s resources)
Lack of Personal Interest
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32. CO-OPERATIVE
A “Co-operative organization is an association of persons, usually of limited means, who have voluntarily joined together to achieve a common economic and through a formation of a democratically controlled business organization, making equitable contributions to capital required and accepting a fair share of risk and benefits of the undertaking”
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33. Main Features Voluntary organization Democratic Management
Service Motive (render service to the members)
Capital and Return thereon
Government Control
Distribution of Surplus
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34. Advantages Easy formation Limited liability Perpetual existence
Social Service
Open membership
Tax advantage
State assistance
Democratic Management
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35. Disadvantages Lack of secrecy Lack of Business Acumen Lack of interest
Corruption
Lack of mutual interest
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36. Selection of Ownership Structure
Nature of Business
Area of Operations
Degree of control
Capital Requirement
Extent of risk and Liability
Government Regulations
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37. CONCLUSION
The appropriate form of ownership is one that helps achieve business objectives in an effective and efficient manner.
To be effective is to do correct things while being efficient is to do things correctly: – You need both!
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